Tokens and Card Not Present

30 May

Super short blog today. A 100% contrived story for context… (believe it is an accurate summary of what is going on today)

Apple to Card Network

Card Network: We would really love to tokenize all those 800M cards on file. Replace them all.. protect you and consumers from a data breach.

Apple: Whats our upside?


Card Network: well … PCI DSS we will give you a pass.. and in the future we may shift liability like we did with VBV/MSC

Apple: You think I’m going to let down my security and risk my brand and stop doing security audits for a certification.. I still have to accept cards for H/W Sales…


Card Network:..  hmm.. good point.. ok, but we won’t require you to have PCI DSS and we may be able to shift liability.

Apple: why don’t you just come back when you CAN shift liability? Also since I’m able to manage risk also treat as a card present transaction (CP interchange)


Card Network: you’ll have to talk to issuers about that interchange stuff, we could still do tokens.. after all we are tokenizing your cards for your new iPhone, just get rid of that old card number.

Apple: You mean get rid of it for the banks that participate in tokenizing through you. WHat about banks that want to generate their own tokens… they are coming to me too. Do I tokenize with them and then also tokenize with you..?


Card Network: ??? Banks are talking to you directly as well??? on Tokens??

Apple: Your network is driving me nuts. You know what I want, I will tokenize tomorrow if you get give me CP rates and shift liability.. but you won’t do that because if you do, I will never use NFC for card presentment and work with retailers to skip that whole payment terminal process (through BLE). You are trying to force me into supporting that darn tap and pay thing and I don’t want to do it.

— end of story —

Logically the new EMVCo token process, plus assurance information should eliminate the “barrier” between card present and card not present. However the Banks know that if tokens have a homogeneous treatment that they can’t enforce the protocol (NFC) and uniform behavior (tap and pay). Banks are not keen to support Apple in creating great consumer experiences which they can’t control. If tokens were treated at card present rates, they could be transmitted and exchanged in many different protocols (QR Codes, BLE, Wi-Fi, …). This would destroy MERCHANT Incentives to support contactless acceptance. This is my primary point today.  Banks can’t let Apple win, or allow for the logical use of tokens as it would

#1 endanger ubiquitous acceptance.

#2 Allow consumers to use debit cards (more complex explanation which I will skip)


Banks want to control the phone to merchant interaction, just as MNOs do. As I described last week in the Apple Payment Experience, we are left with a world where the phone will have to talk to the merchant first (BLE) and then talk to the Bank (NFC) without a sharing of the payment information (and associated consumer attribution).

Networks have a strong desire to support apple, as Visa/MA/Amex “WIN” through card use, they don’t really care how card is used.. just that it is used. I sure do hope these things change.


2 thoughts on “Tokens and Card Not Present”

  1. Tom, let me unpack what I think you’re saying, and please correct/confirm:
    1) Issuing banks want NFC as the only protocol for a mobile device to communication with a POS device; offering Card Present interchange is the issuers means of doing this
    2) V/MC/Amex don’t card what communication proctor is used between mobile device and POS; they just want more card usage

    Deduction: V/MC are not aligned with issuers on protocol for mobile/POS communication.
    Question 1: Why are banks so committed to NFC?
    Question 2: Since banks don’t set interchange nor card rules– V/MC do– doesn’t this indicate V/MC do favor NFC over other communication protocols?

    A comment: all of your writing on this topic assumes that interchange is a huge driver in merchant mobile acceptance at POS; most merchants are driven not by finance departments, but marketing, top line growth rather than expense reduction. I suspect you (along with many in the payments world) miss this point because conversations rarely involve the marketing heads at merchants, and accordingly you overstate the importance of CP vs. CNP rates in merchant decisions.

  2. Hi Tom, your contrived story seems to be closer to the reality. But it makes me think, if apple is unable to solve this problem with banks, would it really go with iWallet in iphone 6 ( it could support NFC but defer wallet to iphone 6s)….

    Also, if merchant does not get hold of payment data would it really be interested in going for such a system with Apple..
    Wouldn’t this incentivise merchants to offer either starbucks type mobile loyalty or merchant prepaid system to retain consumer data/offer better consumer experience??

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